TSO3 INC. QUEBEC CITY and MYRTLE BEACH, SC, May 8, 2018 /PRNewswire/ - TSO3 Inc. (TSX: TOS) ("TSO3" or the "Company"), an innovator in sterilization technology for medical devices in healthcare settings, reported financial results for the first quarter 2018 ended March 31, 2018.
Operational Highlights
- The Company successfully hired, trained and deployed a team of talented and experienced sales, marketing, clinical and support personnel, as well as launched several marketing initiatives.
- To date, the TSO3 sales team has effectively targeted and connected with 531 potential customers, many of which have led to follow up visits or calls. TSO3 has submitted quotations to US medical facilities for over 30 sterilizers, plus related accessories, consumables and service contracts. These now populate the Company's sales pipeline and each is moving through the sales process.
- The Company entered into a co-commercialization agreement with Getinge Infection Control AB ("Getinge"), which allows TSO3 to sell directly to end-users in the US and Canada and purchase sterilizer inventory from Getinge at favourable pricing.
- The Company provided its final additional information response to US Regulators in support of extending the claims of the Company's STERIZONE® VP4 Sterilizer to include the terminal sterilization of duodenoscopes.
2018 First Quarter Financial Summary
- Revenues equaled $0.3 million, as compared to $5.8 million in the fourth quarter of 2017 and $4.2 million in the first quarter of 2017. TSO3 did not ship any STERIZONE® VP4 Sterilizers to Getinge in the first quarter of 2018, but recorded revenue from sales of consumables and service parts. The Company shipped 50 sterilizers in the fourth quarter of 2017 and 36 in the first quarter of 2017.
- The Company did not record license fee revenue in the first quarter of 2018, as opposed to $0.3 million recorded in the fourth quarter of 2017 and $0.2 million recorded in the first quarter of 2017. The Company expects to recognize this license fee revenue in the future in a manner which reflects the outcome of the negotiations with Getinge.
- Gross profit was negative ($0.3) million, as compared to positive $2.3 million or 40% of revenue in the fourth quarter of 2017 and $1.6 million or 37% of revenue in the first quarter of 2017. Gross profit declined as the Company did not record revenue from sterilizer sales to Getinge or from deferred license fee amortization, as compared to prior periods. Gross profit was negative as the contribution to gross profit from consumables and service parts did not exceed manufacturing overhead and other costs incurred by the Company.
- Research and Development expenses were $1.7 million, as compared to $1.8 million in the fourth quarter of 2017 and $1.4 million in the year-ago quarter. The Company incurred expenditures in connection with its laboratory in Myrtle Beach, extended regulatory claims activity and product development.
- Sales, General and Administrative expenses were $2.6 million, as compared to $2.0 million in the fourth quarter of 2017 and $2.2 million in the year-ago quarter. The Company incurred additional expenses related to its increased sales and marketing activity, while it reduced its general and administrative expenses.
- The Company's net loss was $(4.5) million or $(0.05) per share in the first quarter of 2018, as compared to $(1.4) million, or $(0.02) per share, in the fourth quarter of 2017 and to $(2.0) million or $(0.02) per share in the year-ago quarter.
- The Company had $10.0 million in cash, cash equivalents and investments and no debt as of March 31, 2018, as compared to $14.8 million and no debt at the end of 2017. In the first quarter of 2018, the Company used $3.9 million for operations excluding changes in non-cash working capital, and $0.9 million for changes in non-cash working capital, particularly for inventory in support of sterilizer upgrades for which the Company has received a purchase order from Getinge.
Management Commentary
"In the first quarter of 2018, we initiated commercialization efforts on a stand-alone basis as well as continued support of our relationship with Getinge Infection Control and are measuring our progress to date," stated (R.M.) Ric Rumble, TSO3's President and CEO. "We continue to add to our sales pipeline weekly and are moving accounts in the pipeline toward closure. Not all of our quotations will lead to sales, but we have achieved traction in these early stages and look forward to a productive 2018."
Supplemental Non-IFRS Financial Measures
In addition to IFRS financial measures, management uses non-IFRS financial measures to assess the Company's operational performance. It is likely that the non-IFRS financial measures used by the Company will not be comparable to similar measures reported by other issuers or those used by financial analysts as their measures may have different definitions. The measures used by the Company are intended to provide additional information and should not be considered in isolation or as a substitute for IFRS financial performance measures.
Generally, a non-IFRS financial measure is a numerical measure of an entity's historical or future financial performance, financial position or cash flows that is neither calculated nor recognized under IFRS. Management believes that such non-IFRS financial measures are important as they provide users of the financial statements with a better understanding of the results of the Company's recurring operations and their related trends, while increasing transparency and clarity into its operating results. Management also believes these measures can be useful in assessing the Company's capacity to discharge its financial obligations.
Management is assessing its operational performance using supplemental non-IFRS measures which removes significant unusual items that do not reflect the recurring and ongoing operational results and trends.
Additional First Quarter 2018 Financial information | ||||||||
$000's | 2018 | 2017 | 2016 | |||||
Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | |
Net loss | (4,512) | (1,449) | (1,771) | (2,254) | (1,980) | (2,068) | (1,473) | (1,487) |
Financial expenses (income) | (14) | 74 | 48 | 49 | (39) | (69) | (50) | - |
Amortization and depreciation | 315 | 246 | 331 | 221 | 168 | 120 | 147 | 103 |
Share-based compensation expense | 371 | 301 | 632 | 592 | 609 | 286 | 333 | 268 |
One-time write-off of inventory | - | - | - | - | - | 312 | - | - |
Income taxes | - | (59) | 33 | 29 | 27 | 48 | 15 | (12) |
Adjusted Ebitda | (3,840) | (887) | (727) | (1,363) | (1,215) | (1,371) | (1,028) | (1,128) |
Adjusted EBITDA is adjusted Earnings before Interest, Taxes, Depreciation, and Amortization (Adjusted EBITDA). Adjusted EBITDA adjusts net income for (1) significant realized and unrealized foreign exchange gains or losses, (2) financial expenses (income), (3) amortization and depreciation expenses (4) share-based compensation expense, (5) write-downs of certain tangible and intangible assets, (6) one-time write-off of inventory, (7) income taxes, and (8) other significant unusual items.
Summary of Results | |||
First Quarter | |||
2018 $ | 2017 $ | ||
Revenues | 255 | 4,211 | |
Cost of sales | 526 | 2,641 | |
(271) | 1,570 | ||
Expenses | |||
Research and development | 1,704 | 1,353 | |
Selling, general and administrative | 2,551 | 2,209 | |
Financial income | (14) | (39) | |
Total Expenses | 4,241 | 3,523 | |
Net loss before income taxes | (4,512) | (1,953) | |
Income taxes | - | 27 | |
Net loss and comprehensive loss | (4,512) | (1,980) | |
Weighted average number of outstanding shares (in thousands) | 92,877 | 91,995 | |
Basic and diluted net loss per share | (0.05) | (0.02) | |
Basic and diluted net comprehensive loss per share | (0.05) | (0.02) | |
Consolidated Statements of Financial Position | |||
March 31, | December 31, | ||
2018 | 2017 | ||
$ | $ | ||
Current Assets | |||
Cash and Cash Equivalents | 5,521 | 8,044 | |
Short-term Investments | 4,430 | 6,764 | |
Accounts Receivable | 582 | 651 | |
Inventories | 2,456 | 2,040 | |
Prepaid Expenses | 261 | 150 | |
13,250 | 17,649 | ||
Non-current Assets | |||
Property, Plant and Equipment | 2,984 | 3,184 | |
Intangible Assets | 1,879 | 1,886 | |
4,863 | 5,070 | ||
18,113 | 22,719 | ||
Current Liabilities | |||
Accounts Payable and Accrued Liabilities | 2,025 | 2,430 | |
Warranty Provision | 1,182 | 1,263 | |
Current Tax Liabilities | 68 | 68 | |
Deferred Revenues | 2 | 6 | |
3,277 | 3,767 | ||
Non-current Liabilities | |||
Deferred Tax Liabilities | 17 | 17 | |
Deferred Revenues | 6,044 | 6,044 | |
9,338 | 9,828 | ||
Equity | |||
Share Capital | 111,254 | 111,215 | |
Reserve – Share-based Compensation | 6,931 | 6,574 | |
Deficit | (107,698) | (103,186) | |
Accumulated Other Comprehensive Loss | (1,712) | (1,712) | |
8,775 | 12,891 | ||
18,113 | 22,719 | ||
Consolidated Statements of Cash Flows | ||||
First Quarter | ||||
2018 $ | 2017 $ | |||
Cash flows from operating activities | ||||
Net loss | (4,512) | (1,980) | ||
Adjustments for: | ||||
Depreciation and amortization | 315 | 168 | ||
Deferred income tax liabilities | - | 27 | ||
Share-based compensation | 371 | 609 | ||
Investment income | (27) | (75) | ||
(3,853) | (1,251) | |||
Changes in non-cash operating working capital items | (948) | 1,765 | ||
Interest received | 35 | 41 | ||
Cash flows (used in) generated by operating activities | (4,766) | 555 | ||
Cash flows from investing activities | ||||
Acquisition of investments | - | (1,412) | ||
Disposal of investments | 2,326 | 3,504 | ||
Acquisition of property, plant and equipment | (67) | (193) | ||
Acquisition of intangible assets | (41) | (129) | ||
Cash flows generated by investing activities | 2,218 | 1,770 | ||
Cash flows from financing activities | ||||
Options exercised | 25 | 63 | ||
Cash flows generated by financing activities | 25 | 63 | ||
(Decrease) increase in cash and cash equivalents | (2,523) | 2,388 | ||
Cash and cash equivalents at the beginning | 8,044 | 2,698 | ||
Cash and cash equivalents at the end | 5,521 | 5,086 | ||
Q1 Results Conference Call
Date: May 9, 2018
Time: 8:00 a.m. EDT
Toll-free dial-in number: 1 888 231-8191
International dial-in number: 1 514 807-9895 (Montreal); 1 647 427-7450 (Toronto)
Conference ID: 2845669
TSO3's President and CEO R.M. (Ric) Rumble and CFO Glen Kayll will host.
Analysts and investors are invited to participate on the call. Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gilmartin Group at 1 610 368-6505.
Other interested parties may listen to the live webcast of the conference call at https://event.on24.com/wcc/r/1660076/E86DE808AFF783FA01BE70885CC0BDEF which will be available for replay in the Investors section of the Company's website at www.tso3.com.
About the STERIZONE® VP4 Sterilizer
The STERIZONE® VP4 Sterilizer is a low-temperature sterilization system that utilizes the dual-sterilants of vaporized hydrogen peroxide (H2O2) and ozone (O3) to achieve terminal sterilization of heat and moisture sensitive medical devices. Its single pre-programmed cycle can sterilize a large number and wide range of compatible devices, creating a cost-effective sterilization process with error free cycle selection. The device's unique Dynamic Sterilant Delivery System™ automatically adjusts the quantity of injected sterilant based on the load composition, weight and temperature. This capability removes the guesswork and potential for human error, as there is no need to sort instruments and choose the appropriate cycles as with other machines.
The STERIZONE® VP4 Sterilizer is the only terminal sterilization method that is FDA cleared to sterilize multi-channeled flexible endoscopes (with a maximum of four channels) of up to 3.5 meters in length, such as video colonoscopes and gastroscopes - an industry first for any medical device sterilization process.
The STERIZONE® VP4 Sterilizer is also the only cleared low temperature sterilizer that can process a mixed load consisting of general instruments, single channel flexible endoscopes, and single or double channel rigid endoscopes in the same cycle with load weights of up to 75 lb. The ability to run mixed loads significantly reduces labor costs by minimizing the amount of instrument sorting required, while maximizing the device turns (more productivity from increased throughput capacity).
More information about the STERIZONE® VP4 Sterilizer is available through TSO3's website, under the Products section at http://www.tso3.com/en/products/sterizone-vp4/.
About TSO3
Founded in 1998, TSO3's activities encompass the sale, production, maintenance, research, development and licensing of sterilization processes, related consumable supplies and accessories for heat-sensitive medical devices. The Company designs products for sterile processing areas in the hospital environment that offer an advantageous replacement solution to other low temperature sterilization processes currently used in hospitals. TSO3 also offers services related to the maintenance of sterilization equipment and compatibility testing of medical devices with such processes.
For more information about TSO3, visit the Company's website at www.tso3.com.
The statements in this release and oral statements made by representatives of TSO3 relating to matters that are not historical facts are forward-looking statements that involve certain risks, uncertainties and hypotheses, including, but not limited to, the limited history of sales or distribution of the Company, the ability of the Company to obtain the required regulatory clearances to market its products, general business and economic conditions, the condition of the financial markets, the ability of TSO3 to obtain financing on favourable terms and other risks and uncertainties. Although TSO3 believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. The complete versions of the cautionary note regarding forward-looking statements as well as a description of the relevant assumptions and risk factors likely to affect TSO3's actual or projected results are included in the Management's Discussion and Analysis for the year ended December 31, 2017, which is available on the Company's website. The forward-looking statements contained in this press release are made as of the date hereof, and TSO3 does not assume any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise unless expressly required by applicable securities laws.
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SOURCE TSO3 Inc.
